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Central bank digital currency has many benefits and some risks, says RBI Deputy Governor T Rabi Sankar

Introduction of a central bank digital currency (CBDC) has the potential to provide significant benefits, such as reduced dependency on cash, higher seigniorage due to lower transaction costs, reduced settlement risk, a top RBI official said on July 22. A CBDC is the legal tender issued by a central bank in a digital form. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different.  “Introduction of CBDC would possibly lead to a more robust, efficient, trusted, regulated and legal tender-based payments option,” said deputy governor T Rabi Sankar at his keynote address at a webinar organised by the Vidhi Centre for Legal Policy, New Delhi.  However, there are associated risks, Sankar said, adding these risks need to be carefully evaluated against the potential benefits. “It would be RBI’s endeavour, as we move forward in the direction of India’s CBDC, to take the necessary steps which would reiterate the leadership position of India in payment systems. CBDCs is likely to be in the arsenal of every central bank going forward,” Rabi Sankar said. Read full here.